For a Spanish mortgage banks offer a coverage ratio of up to 80% for fiscal residents and 70% for non-fiscal residents over the valuation price. Take into account that you´ll get less mortgage for houses in the countryside. The reason for this is that the official valuation often lies far below the market value due to their legal situation. In this matter, there´s no difference if the property has a DAFO certificate or not. In a single case, the purchase price is lower than the valuation, so then this price is used for the value of the mortgage.
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Reservation subject to mortgage or valuation
In Spain it´s not common to sign a reservation contract ´subject to mortgage or valuation price´. If the seller agrees, though, then it might be useful to include this clause to guarantee your reservation fee.
If you want to be able to move fast, it might be convenient to have an economical pre-study before the viewings. This gives you more certainty about your purchase budget and your maximal monthly payments. A maximum of 30% of your income you may use for housing costs and you need for this an official report of debts from your home country. The lawyer can facilitate the application and explain/translate the most important conditions.
After the final valuation and economical approval, the offer for the Spanish mortgage stays valid for a maximum of 3 months during the purchase process.
Costs Spanish mortgage
You can choose between a fixed or flexible interest rate plus EURIBOR. With today’s low interest many chose the first option. Comparing and negotiating between banks is definitely worth the effort! Be sure to also ask about the total of all initial costs. Especially for a small mortgage, these are relatively high. And there are also costs attached to mortgage cancellation.
Until 2019 the mortgage client also paid the following costs within his normal purchase costs and transfer tax. This, however, has changed and these costs can be refunded. This potentially needs to be done through a legal procedure.
- Valuation (= third party costs)
- Mortgage Deeds of notary
- Costs Land Registry
- Opening commission
- Administration costs/After-sales
- Obliged house insurance and life insurance (these often do give discount in you mortgage)
AJD tax (Actos Juridicos Documentados)
After a lot of commotion, the Spanish government in November 2018 changed the law and the client no longer pays the 1,2% AJD, Actos Juridicos Documentados tax or stamp duty (permanently lowered). This tax was calculated over the guarantee value (this is a higher amount than the mortgage value). Because these costs now are for the account of the bank it is to be expected that banks will raise other costs or the interest rate.
Mortgage Deeds and registration
The Mortgage Deeds (Escritura de Hipoteca) you of your lawyer signs at the notary on the day of completion with a representative of the bank. The document is more than 60 pages and nobody ever read more than the first 20 pages… Thereafter during the after-sales phase, the Title Deeds and the Mortgage Deeds are registered at the Land Registry and the Cadastre by the bank. This means that in case of a house purchase with a Spanish mortgage the bank presents you your final balance. The lawyer mostly does take care of the transferring of the service contracts and the signing of the Spanish wills (with advice inheritance tax).
Mortgage cancellation
Mortgage Deeds are inscribed in the Land Registry and will therefore appear in the Nota Simple. In case that there is still mortgage to pay or to unsubscribe, the lawyer of the buyer can take care of this. To cover the costs he´ll use a price retention for which the vendor later will receive a balance. These are the cost for the Mortgage Cancellation Deeds, the Land Registry and potential administration costs.
Legally the vendor needs to sell the house without any debts. But there are also buyers that decide differently and consciously take over the Spanish mortgage. This often happens with new build projects of a Promoter.
Valuation
In every purchase, you can hire an estimator to evaluate the house. (In the case of a Spanish mortgage this is obliged and it´s always done by a technical valuation report of a valuation company appointed by the bank). There are some costs attached and in Spain, in general, it is considered less important. In most cases the official valuation lies significantly below the commercial market value, especially in the countryside. The coverage ratio is always calculated over the lowest of either the valuation or the purchase price.
Paper valuation
Some banks on request can make a ´paper valuation´ (based on Nota Simple and Cadastre) to save costs for the moment. But this can still vary quite a bit from the final taxation of the certified valuation company.
Second valuation chance for higher mortgage
Tip: Officially there seems to be a rule that valuation should be centrally registered. In practice, however, this often isn´t the case. Therefore it´s good advice to see if maybe a second valuation is interesting with a change on a higher valuation price. The only consequence is that you´ll need to go to another bank in this case.
Referrals & references real estate agent & lawyer:
Need a referral for a good estate agent in Andalusia? Or like to receive an example offer for the legal investigation of a specialized and independent lawyer? Find out more through the link above.
©2023, Ariane van Wijk